Day Trading Stock Market Cycles Part 2: This video (and article) on day trading stock market cycles will teach you how to time your trades during expansion-contraction cycles, allowing you to trade in the most profitable times in the market. This will surely increase your earnings and greatly contribute to your overall trading psychology.
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Day Trading Stock Market Cycles Part 2
Welcome my friend to part two of trading stock market cycles. Today, we’re going to talk a little bit about day trading, but a lot of what I’ll share is going to be applicable to swing trading as well, and it also applies for stocks, FOREX, futures, and commodities. But I’m willing to give you an example at the end that is specifically for day trading. By the way, if you missed part one, then you can watch this first. Part one is not necessary to watch before this part two, but go ahead and after you’re done with this, type in trading stock market cycles part one, top dog trading, into the search bar of Youtube and you find it. So last time we talked about seasonal or calendar cycles, agricultural seasons or retail seasons, travel, etc. Today, we’re talking about a very different type of cycle.
This one is volatility. So what do I mean by volatility cycles? Well, I call these trades, this family of trades, Ex-Con trades, and that stands for expansion-contraction. So volatility has to do with the range of the market within a period of time. How much does price cover with regard to the expansion of the movement of prices from highs to lows and lows to highs, and then we get into narrow range markets and that’s when we have contraction – that’s actually a cycle in the market. So you will see markets that are sometimes very volatile, and they make these big huge swings and people think ‘that’s really exciting, I want to get into that market.’ And then other times people see markets that are in very narrow range and they’ll say ‘I don’t want to get into that.’
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There is some truth to that, but it is a little trickier than it is at first glance. So I want to share with you how I trade this and see if it makes sense to you since most people, in my opinion, trade this backwards. And I’ve done very well with this type of trading by the way – I’m speaking not only from experience but from success. So here’s how I see most people doing this, they will scan for high volatility markets to trade. And it kind of makes sense, right? There’s a logic to that. A lot of times, there are certain stocks or forex pairs or futures commodities that are high volatility markets, and they leave it at that as though it’s always a high volatility market, a market that’s always tending to move and make big swings.
Of course, they want to get on that to make some big profits quickly. Problem is they don’t realize that this is a cycle that pretty much every market goes through. Some markets will, let’s say there’s a particular stock that’s highly volatile, well it’s not that it’s always highly volatile, it’ll go through a period of movement and then all of a sudden it starts to slow down and contract. We’ve actually seen that in some cryptocurrencies recently where everybody gets all excited. Now, the CME and SIBO have come on board and it started to contract a bit again, so there you go. ‘You don’t want to chase the high volatility’ is one of the ways of saying this. In practical terms, one of the mistakes people do is they will use a scanner and scan for high volatility markets to trade.
Stock market cycles analysis
The problem is that by the time a scanner accumulates enough data for it to then show up and mathematically trigger as a high volatility market, then it could be very close to the time the period or that cycle ends, and the next cycle of low volatility or contraction to kick in. Then they wonder, ‘how come every time I get into these markets, they really move and go into a narrow range.’ And they think ‘my broker’s trading against me, the market makers, they got that out for me.’ No, it’s just that they haven’t been taught about the Ex-Con cycle, expansion-contraction cycle. So they’re always trading the wrong end of it. And especially because, as I said, mathematically, the scanners need a certain amount of time and number of data to accumulate in order to indicate that this is a high volatility market.
Sound familiar? Because what I like to do is exactly the opposite and just like most things in trading, the opposite usually works. So if you have ever felt like ‘I’m a perfectly imperfect trader, and if I just did the opposite of everything I did, I’d probably make some money.’ Well, you know what, probably not far from the truth because trading, actually, is very counter-intuitive. So what I do is I trade inside contraction. Now, what does that look like? Well, this is not completely new. There are other people who do this as well and you’ve heard of these types of patterns – triangles. I love trading triangles. In fact, if you want to learn exactly how I trade inside triangles, I have another video specifically on that technique, just type in top dog trading and triangles, but I don’t wait for the breakout of the triangle.
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Some people wait for the breakout of the triangle, and then the retrace before they get in. I don’t want for any of that. I trade while it’s inside the triangle before the breakout. So I’m entering inside of contraction. Another example will be Bolinger band squeezes, very similar to triangles. So you get the idea. These are patterns that are very well known, but timing when to get into these is the key. Speaking of timing, by the way, I do have a tremendous timing indicator, would be happy to give it to you absolutely free since you are watching this. Be happy to give it to you. Just send an email over to me at support@topdogtrading.com and we’ll show you how to get that absolutely free and that will really help you with your timing.
I find this as one of the things that people neglect. They understand price levels, support resistance pretty well and that’s great, but there’s another side of the chart, not just the Y-axis which is price, but then there’s the X-axis and that is time. That’s 50 percent of the chart. You better know how to time your entries with precision, and that’s what this indicator will help you. I promised to give you a day trading setup here and so that’s what this is. This is a typical pattern and you’re probably familiar with it. The market moves most of the time in the morning between the open of the market and launch, and then during lunchtime, the market quiets down, goes into beta consult, consolidation in the swings between the highs and lows, gets more narrow range, and then in the afternoon, it breaks out again.
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So not every day is like this. This is again a meta-pattern. It is not an everyday pattern, so this won’t happen every day, but it gives you something to look for. One of the traits that I look for, for example, is to trade at the end of lunchtime. So I am watching and saying ‘let’s find out a time to trade this inside of lunchtime, but toward the end of lunchtime.’ I got to tell you a little secret here; sometimes back when I was trained at the Chicago mercantile exchange, we would watch the whales and because everybody knew this meta-pattern. Again, this is the problem, right? Once everybody gets to know something then it stops working, though it’s not that it stops working all the time. But, again, everyone knows this.
So the big money, they don’t want to be followed. And what a lot of these guys would do is they turn in the accounts over to their fledglings and they would just basically say, ‘do no harm while I’m gone,’ and they leave the building or they’d leave the room I should say, and it’d be gone maybe a little bit and then they’d come back in. They didn’t actually go to lunch. They wanted everyone to think they left and then they would take a trade during lunchtime.
Stock market cycles charts
I find these happen about once or twice a week, but this is another one that you can look for. Again, you’re going to have to be patient because it’s not gonna happen every day. Nothing in trading is meant to be easy. In fact, if you feel like the market’s against you, you are 100 percent correct because the other people in the market, especially the professionals, they are not there to give you money. They are there to take your money. So they make it as difficult as possible. They always tried to hide their tracks. They know these common things that people are looking for and they do intentionally try to throw you off of their tails.
There you go. The patient one is the one who wins. In fact, I’ve often said that a professional trader, outpatient amateur traders. So these little anomalies, it’s not even an anomaly because it does happen pretty much every week, once a week, sometimes twice a week. And when it doesn’t, then you just wait until toward the end of lunch and trade into the afternoon. But if you wait for the breakout in the afternoon, usually, you’re giving up too much money. The reward is pretty much going to be gone by the time you see it again, and that’s too late. Professionals are early and retailers are always late. So you’ve got to be early, and this is why you need to read charts. That’s why you need to learn how to read the inner details.
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I always say that the dollars are in the details because every day, it’s going to be a little different. Again, the markets are not here to make it easy for you. You gotta read it day by day, bar by bar because each day is going to be different. So, if you liked this video on day trading stock market cycles, please understand that sure it’s free. But if you got value from it, you actually have a moral obligation to pay it forward to others. Click on that beautiful little share button below so that others can benefit from it as well. Also, please subscribe to the videos because that way you’ll get notified every time I’d come up with a new tutorial, which is every week, click the thumbs up icon and leave a comment.
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